The changes in personal income tax rates, including primary rebates, tax-free thresholds and income brackets, add up to a lot of work for SME companies that still use manual systems or operate spreadsheets for their payrolls.
Dedicated automated payroll and tax software implements the tax and medical aid-related revisions announced by Finance Minister Trevor Manuel in the 2008/09 budget and ensures that payrolls are totally accurate and tax compliant from 1 March 2008 when the new budget takes effect.
Grant Lloyd, MD of payroll software specialist Softline Pastel Payroll, says the updating of manual systems can be a daunting task for smaller companies with just nine working days left before the new financial year when the new tax rates, rebates and thresholds announced by the Minister kick in.
“With automated payroll software functioning on modern operating systems it is quick and simple to make the changes to the software as required by the new budget. Our users will be able to simply download the revisions from our website to ensure that their payrolls will be fully compliant with the tax, medical aid and legal requirements for the new tax year.
“So users don’t have to worry about the complex array of new tax and legal requirements and will have the peace of mind that comes from full compliance and absolutely accurate processing of the individually complicated employee portions of the payroll from day one.”
There are changes in all six taxable income brackets, with minimum and upper income levels increased across the board although tax rate percentages are unchanged. This will especially benefit the lower and middle income tax payers.
Primary and secondary rebates increased to R8 280.00 and R5 040.00 respectively and the primary and age 65 and over tax-free thresholds to R46 000.00 and R74 000.00 respectively.
Medical aid cappings increased to R570.00 per person for the first two dependants and to R345 per person for each additional dependant. If the employee is solely responsible for the medical aid contribution the employee will be taxed on a lessor amount and therefore receive a tax benefit. If both the employee and employer contribute towards the medical aid and the employer’s contribution is higher than the allocated capped amount, then the employee will only be taxed on the excess contribution as a fringe benefit.
“All of these changes must be effective in payrolls from 1 March or tax errors will result in having to pay penalties and interest,” says Lloyd. “Companies will save money by using an automated payroll system through time savings and by ensuring that only the correct amounts of tax are paid. Errors not in SARS’ favour can have a serious and expensive knock-on effect.”